Public Trust
[2021] NZHC 2852
•22 October 2021
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2021-419-0030
[2021] NZHC 2852
UNDER the Charitable Trusts Act 1957 IN THE MATTER
of two charitable trusts created by the wills of FLORENCE AGNES SMAILL and JAMES MACKAY SMAILL
BY
PUBLIC TRUST
Applicant
Hearing: On the papers Counsel:
V M Mann for Applicant
Judgment:
22 October 2021
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 22 October 2021 at 5 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors: Ellice Tanner Hart, Hamilton
RE PUBLIC TRUST [2021] NZHC 2852 [22 October 2021]
Introduction
[1] By originating application dated 22 February 2021, the applicant (“Public Trust”), as trustee of each of the Florence Smaill Charitable Trust (“FSCT”) and the James Smaill Charitable Trust (“JSCT”), seeks approval of a scheme concerning the two trusts. In particular, Public Trust seeks an order to:
1.Vary the mode of administering the charitable trusts known as the James Smaill Charitable Trust and the Florence Smaill Charitable Trust so that both charitable trusts will henceforth be amalgamated as one charitable trust to be known as the James and Florence Smaill Charitable Trust; ...
2.[Costs].
[2] The application is made under Part 3 Charitable Trusts Act 1957 (“Act”). Part 3 of the Act makes provision for two circumstances. The first is an inability to carry out the particular charitable purpose for which trust assets or income is held. The second is to extend or vary the powers of the trustee(s) or to vary the mode of administering the trust if to do so would facilitate the administration of trust assets or the carrying out of the trust. In these circumstances, the trustee(s) concerned may seek the Court’s approval of a scheme intended to remedy the position.
[3] In this case, the application is made pursuant s 33 of the Act on the grounds that:
(a)it is impracticable or inexpedient to carry out the purposes of the FSCT as the available trust fund is inadequate to carry out its charitable purposes and objects; and
(b)that the charitable purposes and objects of both trusts can be better achieved by amalgamating and administering the trusts as one charitable trust to be known as the “James and Florence Smaill Charitable Trust”.
[4] An applicant for an order under Part 3 must submit the scheme to the Attorney-General for consideration, who must then report on the same; file an application with the Court seeking approval of the scheme, together with the scheme
itself and the Attorney-General’s report; and give notice of the application, by advertising the same in accordance with the requirements of the Act.1
[5] Each of those matters has been attended to in this case. By his report of 22 February 2021, the Attorney-General confirms the scheme may be approved.2 The required advertising has taken place.3 There is no opposition to the order sought.
[6] The effect of ss 53 and 56 of the Act is that I may approve the scheme if I think fit and if satisfied that:
(a)the scheme is a proper one and should carry out the desired purpose or proposal;
(b)the scheme is not contrary to law, public policy or good morals;
(c)the scheme can be approved under, in this case, Part 3;
(d)every proposed purpose is charitable within the meaning of Part 3 and can be carried out;
(e)there has been compliance with the requirements of Part 3, as there has in this case.
Background
Establishment of the FSCT and JSCT
[7] The following matters appear from the affidavit of Mr S J Vartan, a manager with Public Trust, sworn on 22 February 2021. I also have a memorandum of counsel for Public Trust, Ms Mann, of 17 September 2021.
[8] Ms Florence Smaill died on 5 July 2007. By her will dated 26 August 2003, Ms Smaill settled the residue of her estate in the following way:
1 Charitable Trusts Act 1957, ss 32(1), 33 and 35.
2 Section 35.
3 Section 36.
6.1 ... to my Trustees on trust:
...
(5) To hold such residue for the purposes of the FLORENCE SMAILL CHARITABLE TRUST created by this my Will in terms set forth in detail in the Schedule hereto.
[9] Mr James Smaill died on 13 June 2011. By his will dated 4 March 2010, Mr Smaill settled the residue of his estate in the following way:
5.1 ... to my Trustees on trust:
...
(5) To hold such residue for the purposes of the JAMES SMAILL CHARITABLE TRUST created by this my Will in terms set forth in detail in the Schedule hereto.
Purpose and administration of the trusts
[10] The terms of the two trusts, set out in the schedule to each will, are identical and provide:
2.Objects
The Trustees shall hold on Trust fund in perpetuity upon the following Trusts:
(a)To pay out of the income of the Trust fund the administration expenses thereof notwithstanding that some of those expenses may be of a capital nature.
(b)At their discretion to apply the whole or so much of the income as they think fit or such part of the capital as they think fit for the following organisations:
(i)The Marlborough Hospice Trust
(ii)Presbyterian Support (Upper South Island)
(iii)The New Zealand Institute for the Blind
(iv)Bethsaida Trust Board Incorporated
(c)Notwithstanding the foregoing I express the wish (but without imposing a binding trust) that in ordinary circumstances my Trustees on an annual basis apply the income of the fund only towards one or more of the foregoing organisations as they shall in their sole discretion decide and that as well they may make some provision that the capital fund keeps pace with
inflation either by choosing investments accordingly or by capitalising part of the income in each year. Only in unusual circumstances do I contemplate the capital would be applied to the forgoing organisations or institutions.
[11]Likewise the powers of the trustees:
3.Powers
(a)My Trustees shall have absolute discretion to determine the manner in which grants are made as aforesaid.
(b)Any income which may remain unused in any years shall be accumulated and added to the capital of the said fund and be dealt with as part of such capital provided that my Trustees may at any time if they think fit apply the accumulation of any previous year or part thereof as if it were income arising in the then current year.
(c)In determining the distribution of grants my Trustees may make some inquires and call for and reply upon such opinions as they think appropriate.
(d)My Trustees shall not be bound to see to the application of any grant and their responsibilities shall cease upon payment being made.
(e)My Trustees may delegate the powers given to them to any person or body of their choice and that delegation may be general or specific.
[12] Public Trust was appointed as the trustee of each trust pursuant to Deeds of Retirement and Appointment of Trustees dated 23 April 2018.
Proposed scheme of variation
[13]As at 31 March 2019, the capital funds of the JSCT and FSCT were
$612,596.00 and $180,523.00 respectively. The capital of the FSCT being substantially less than that of the JSCT, Public Trust considers that it would be significantly more cost effective for the FSCT and the JSCT to be amalgamated to form one charitable trust, for the following reasons:
(a)it would be necessary to prepare only one set of accounts in each year; and
(b)as matters stand, the annual costs of administering the FSCT exceed its income. As a result Public Trust has not had any income to distribute to the beneficiaries of the FSCT. Amalgamation would permit Public Trust to apply at least some income of the FSCT to charitable purposes.
[14] Hence the proposal to amalgamate the two trusts. This is to be effected by execution of a Deed of Resettlement, resettling the assets of the FSCT on the trustees of the JSCT. In addition, Public Trust will execute a Deed of Variation of Trust, following which the JSCT will be known as the “James and Florence Smaill Charitable Trust”.
Discussion
[15] I accept that, absent the making of the order sought, it is impracticable or inexpedient to carry out the purposes of the FSCT. I am also satisfied that the amalgamation is expedient for the reasons Mr Vartan gives; that the requirements in
[2] have been complied with; and as to the matters in [6] above. Accordingly, I propose to make the order sought.
Orders
[16]Pursuant to s 33 of the Act, I make the order sought in [1] of the application.
[17] I also order that the costs of this application be paid from one or other of the two trusts, including the sum of $750 to be paid to meet the costs of the Attorney-General.
[18]It will be for Public Trust to submit the appropriate order for sealing.
[19]I reserve leave to apply.
Peters J
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